Main menu

The financial benefit of being social

As regular readers of my blog will testify, I believe that social can be a way of life for companies rather than merely a channel to push products and services out through. Nevertheless though, many will look to utilise social media for selling. Whether this works or not has been a matter of some debate pretty much since social media hit the big time.

Some would argue that social is about relationships and conversations, and therefore is ill suited to the last click wins tracking that is often used to determine the financial value of online work. Some new research by the University of Buffalo however suggests that social media is invaluable in a sales sense.

The study, led by Ram Bezawada, reveals that customers that engage with a company via social media, are better customers, often spending more money than those that don’t engage.

“There have been doubts about the effectiveness of social media for business because the link between a firm’s efforts and the return on investment hasn’t been established,” explains Bezawada, who is co-author of a study scheduled for publication in Information Systems Research.

“Our results show that when customers engage with a business through social media they contribute about 5.6 percent more to the firm’s bottom line than customers who do not.”

The study investigated customer participation with the Facebook page of an organisation, and combined this with their purchase history at the company to gain an understanding of how important these people are to the firm.

What is important to point out from the research however is that it doesn’t recommend using social channels to bombard customers with sales messages, but to instead use them to strengthen the bond between customer and company. It’s this bond that then leads to greater sales volume.

Post navigation

42 thoughts on “The financial benefit of being social”

It basically boils down to metrics and ROI measurement, based on initial goals and objectives. If sales is your main focus, moving the needle and engaging with your loyal customer base on social media may or may not increase the bottom line. The question is rather: can you achieve similar ROI or effectiveness without social media, using traditional methods such as email, microsites, direct mail (yeah, you know, with a stamp?) or even, yikes, phone calls…

In a majority of cases, brands and organizations will realize that social media indeed increases effectiveness, reduces costs and creates a closer sense of engagement and discussion, assuming proper resources are allocated, in terms of time, people and money. But in some cases, social media may indeed be ill-suited for some companies. It will depend on target audience and clientele, industry or internal business strategies.

Quite agree Frederic. As you say, it might be that social media is ill suited for what you're trying to do, or that sales is not what you want to get from social media, or that Facebook/Twitter/AN Other is not the best place for you to fulfill your goals.

You should never feel pressured into doing something just because others are, much better to decide for yourself what the best option is based upon your own unique circumstances.

I always wonder about this conundrum: are customers more likely to spend more because the brand engages them, or are customers who spend more more likely to engage a brand? Not sure I said that well 🙂 But people who are fans of a company are going to like/follow it… so would they have spent more anyway, or does engagement actually influence spending? ROI is one of the trickiest things about social so we have to really be clear about what our goals are and what we're measuring. Interesting stats here, food for thought!

I think being social for companies is huge. But I also think they must do it right. So many companies fail and promote in their social media, and who wants that. If they engage with people and be human that’s where they are going to explode their social media, and sales.

I should probably show this post to my customers 😛 I'm having a hard time convincing more and more small companies that places like Facebook and Twitter can be greatly beneficial for their companies. Luckily, those who do try doing something about this usually end up satisfied and invest even more.

I see so many companies not using social media marketing to their full potential and they are missing out big time. A lot of them pay to have a Facebook, Twitter and Linkin page created for them and then think all the works been done! Although I think social will catch on eventually, some will take longer than others to see the long term benefits.

I personally would choose a company with a strong social presence over one that couldn’t give a darn about their presence. I personally have fb, twitter, and instagram for my customers to interact with me and give me fast feedback

I could not agree with you more. There is nothing worse than a company that get s your “like” or email and just bombards you with offer after offer. It’s about connecting with the customer, supporting them with helpful information making their life easier. This creates a great relationship with your customers and they in turn want to help you and give you their business.

The world has been changing. Marketing is the same. Traditional marketing is not enough for good marketing because it could be less cost effective. Social media marketing is a new marketing tool and is a new platform for people to get more interaction with clients and customers.

If you are saying you are old and not bother to use social media, that is fine, but you miss a great way to push your business. (Just saying)

Also, it depends on what you sell to people, and not all social media are going to fit for your products and service.

I should probably show this post to my customers. I’m having a hard time convincing more and more small companies that places like Facebook and Twitter can be greatly beneficial for their companies. Luckily, those who do try doing something about this usually end up satisfied and invest even more.

Great article. Social media is a great tool for building trust and building good relationships. However, too often it is just used to push products which has the opposites effect – reduces trust and ends relationships.

I think we’re going back to the main street way of doing business. Back then you were on a first name basis with your butcher and the local grocer was a personal friend, in other words they were people you knew, liked and trusted. People were personally invested in seeing each other succeed and local merchants were invested in providing you the best products and services they could.

Social Media has taken us back to that, unfortunately most people still don’t grasp that. Hopefully that idea will become popular sooner than later as companies begin to catch on and follow after a Zappos or Honda who are clearly thinking this way.

Social Media is a long game and its about Lifetime Value of the customer not fast cash. That’s my 2 cents.

Social media can be very powerful to small businesses. This has given moms out there, a chance to do business at home and not be away from the kids. I have also seen some business that started only thru social media but has blossomed into an actual shop. Social media has given a new meaning to backyard businesses. So I believe that it is also essential to include social media channels to every marketing, business and financial plan. But for big companies, it may only be just a channel to interact with the clients, like a community.

Interesting post. A point to add is that the sheer power of social media in terms of people genuinely informing others of the good and the great means that if providers of goods and services have a worthwhile story to tell and a service to back it up then they can certainly be exposed to heightened attention.

I like how social media is becoming the norm for doing business. A business that is able to share their thoughts and connect with their customers online over and over is bound to win over their customers. I like to think of it a pay it forward type of customer service prior to getting the customer.

This comment on the article you share: “Social media activities help strengthen the bond between the customer and the firm – and boost financial performance,” says Bezawada.

I also think being social for companies is massive. We are trying to do it the best we can, and for sure we have found that you have to do it right. Facebook is very useful for keeping clients engaged ( retention) and making offers to customers. We haven’t yet had an explosion of sales but we are happy with progress to date.
Keep up the good work.

It seems that business may be almost a decade behind some of the technology. Places like Yelp and others have been able to help business with their online ratings. Personally, I like seeing the reviews on Amazon and read about real experiences people are having with products. In addition to this, when a company decides to reach out socially, they will always increase their profits IMO.

It’s interesting for sure. When you think about it, people who ‘Like’ a Facebook page for a business, they are choosing to do so, and inviting that business into their personal space. Rather than an ad, that is uninvited. I would expect that this relationship does give the business the opportunity to maintain a ‘welcomed’ relationship with the customer. That is, if they don’t just try to sell, sell, sell.

With all of the ways to make money online, utilizing social media to build and establish relationships should be part of your business model. Not just buying ads on those platforms, but engaging with customers.

A business that is able to share their thoughts and connect with their customers online over and over is bound to win over their customers. I like to think of it a pay it forward type of customer service prior to getting the customer.

As Stewart Wilde has frequently pointed out, love is a cash commodity. Og Mandino, likewise, condones getting to know people on a personal level before selling anything to them. Ultimately, it's the connection that matters, whether that's a connection between two human individuals or a firm and an individual. Making the connection, LISTENING to the other person (feedback), and making them feel known is vital to a good relationship, whether that relationship involves money or not down the road.

I dig social media. It brings the internet world into your real world… "meat space" as one author puts it. Getting recognition, being listened to, having someone shout out to you, all are very rewarding things for us as individuals. I, for one, love it. Of course, I want to provide value in order to have people truly engage with me and my brand. And any firm worth their salt will also strive for excellence in service and product.

Yep, engage me. Make me feel heard and special and I'll spend more money with you. My favorite part of the study was Bezawada saying, "When building communities, businesses should craft personalized messages, encourage member contribution, integrate knowledge about customers from both online and offline interactions, and create specialized sub-communities for customers looking for premium and unique products."

I've found in my online marketing education that building good relationships, trust, and providing real value are what matter most for sales.

Social media is wonderful for businesses and financial gain. Just think of the broad audience you reach through social media sites. Suddenly more people know about your products and services. You do not have to directly pitch it to them. Being subtle and interacting with consumers and potential consumers is a prudent way to go. Social media essentially puts you out there and gets you more attention. In this day and age, people want to know what you are marketing, and when you connect with them, they will be more likely to buy.

just started my own business a couple of months ago, and quickly learned that building good relationship is one of the most important criteria in business. And to have a good relationship with your client, you better work on being sociable

I always wonder about this conundrum: are customers more likely to spend more because the brand engages them, or are customers who spend more more likely to engage a brand? Not sure I said that well 🙂 But people who are fans of a company are going to like/follow it… so would they have spent more anyway, or does engagement actually influence spending? ROI is one of the trickiest things about social so we have to really be clear about what our goals are and what we're measuring. Interesting stats here, food for thought! Great article this site has provide! empreendicas gratitude.

I think being social for companies is huge. But I also think they must do it right. So many companies fail and promote in their social media, and who wants that. If they engage with people and be human that's where they are going to explode their social media, and sales.